The Natural Rate of 
53s I Interest 

by 

Joseph Massie 



A REPRINT OF ECONOMIC TRACTS 

Edited by 

Jacob H. Hollander, Ph. D. 

Professor of Political Economy 

Johns Hopkins University 





Oass_#£5££ 










A Reprint of Economic Tracts 

Edited by 

JACOB H. HOLLANDER, Ph. D. 

Professor of Political Economy 

Johns Hopkins University 



Joseph Massie 



on 



The Natural Rate of Interest 
1750 



^ 



<6 



Copyrighted 1912, by 
THE JOHNS HOPKINS PRESS 



BALTIMORE, MD., U. S. A. 



INTRODUCTION 

The circumstances of Joseph Massie's life are hidden in the 
same irritating obscurity 1 that enshrouds other notable English 
economic writers — Vanderlint, Harris — of the middle eighteenth 
century. We know only of his literary productivity in the period 
from 1750 to 1765, and of his death — the latter recorded in a bare 
note in the Gentleman's Magazine: 2 " November, [1784]. In Hol- 
bourn, Mr. Joseph Massie, well known for his political writings." 
Some of his tracts are inscribed to statesmen of the period 
in the deferential manner that suggests the favor-seeking pamph- 
leteer rather than the detached philosopher, 3 and this impression 
is confirmed by the infrequent mention of his writings or opinions 
in contemporary economic literature. 

As a matter of fact, it is as bibliographer rather than as author 
that Massie figures largest in the history of economic thought. 
The " Fifteen Hundred, or more, Books and Pamphlets " concern- 
ing "the Commerce, Coin, and Colonies of Great Britain" which 
he had been " above Twelve Years in making " — though he 
" resided in London, and was not sparing of either Time or Money 
to enlarge it " * — were sold in 1760, and thereafter dispersed, lost 
or hidden — how and in what manner we have no knowledge. The 
only clue is Massie's own brief memorandum: 3 " Nov r . 1760. Sold 
the whole Collection Excepting those under Five Heads — Viz — 
Duplicates — Tables — Abstract of Laws — Single Acts — Treaties." 

But Massie left a monument to his zeal in an admirably com- 
piled finding-list which he continued to revise and extend even 
after he had disposed of the actual collection, and this ' Alpha- 



1 " It is surprising that the personal history of this celebrated 
pamphleteer is unknown." (Notes and Queries, February 10, 
1866; 3d series, vol. ix, p. 119.) 

2 1784, vol. ii, p. 876. 

3 The copy of Massie's " Observations upon Mr. Fauquier's Es- 
say " (London, 1756), in the possession of the present writer is 
a presentation copy from the author to Lord Townshend. 

* Massie, " Representation concerning the Knowledge of Com- 
merce as a National Concern " (London, 1760), pp. 1, 14. 

5 Upon a slip attached to the MS. " Index " ; see following note. 



4 Introduction 

betical and Chronological Index of Commercial Books and 
Pamphlets,' • which by December, 1764 had grown to 2377 items, 
still serves as the most helpful guide to English economic litera- 
ture before Adam Smith. 

Massie's interest in economic literature was not, however, 
merely as bibliophile or collector. If not present from the first, 
the intention soon developed of utilizing the materials that he 
had gathered for two works, a " commercial history of Great 
Britain " and a treatise upon the " elements of commerce illus- 
trated by Applications." In 1760 Massie submitted the desira- 
bility of their preparation to the commissioners of the Treasury 
and of the Exchequer and sought public employment therefor. 7 
Nothing seems to have come of the proposal, and the tract in 
which it was urged is still of interest as defining a present need 
as well as suggesting an early and vivid conception that economic 
principles must rest upon economic induction. 

The energy which was denied its larger opportunity found vent 
in a series of pamphlets and tracts written year after year from 
1750 to 1764 and dealing with a wide range of contemporary 
issues of social and economic import. 8 Of these tracts the essay 
here reprinted is the earliest and one of the most important. 
More than any other it is concerned with an economic principle, 
marking a phase in Massie's mental history before the stress of 
contemporary issues had made him pamphleteer and tract-writer. 
Whether or not it be properly entitled to the distinction, accorded 
it by many critics since Roscher's 8 time, of refuting the direct 
association of the rate of interest with the amount of money, 
which two years later Hume repeated with greater simplicity but 
no more force — Massie's tract surely ranks as an important ele- 
ment in the pre-Smithian discussion of profits, and neither the 
doctrinal historian nor the theoretical economist may properly 
neglect its content. 



"British Museum, Lansdowne 1049; lettered " Massie's Catalogue 
of Commercial Tracts." 

7 " Representation concerning the Knowledge of Commerce," 
p. 25. 

8 For an apparently complete list, see Palgrave, " Dictionary of 
Political Economy," sub Massie. 

""Principles of Political Economy" (Eng. trans., New York. 
1878), vol. i, p. 150 n. 



Introduction 5 

The present edition is a reprint of Massie's essay as issued in 
1750. 10 The general appearance of the title page has been 
preserved, the original pagination has been indicated and a few 
notes have been appended. 

Baltimobe, December, 1911. 



10 The formal collation of the tract is as follows: Title, 1 1., 
preface, [iii]-iv. 5-62, 8°. As early as 1758 the tract was out of 
print (Massie, "Farther Observations concerning the Foundling- 
Hospital" (London, 1758). 



AN 

ESSAY 



ON THE 



Governing Causes 



OF THE 



Natural Rate 



OF 



INTEREST; 



WHEREIN 



The Sentiments of Sir William Petty 
and Mr. Locke, on that Head, are con- 
sidered. 




LONDON: 

Printed for W. Owen, at Homer's Head, near 

Temple 'Bar. MDCCL. 

(Price One Shilling.) 



©CI.A30563I 




PREFACE. 




N Inquiry into Opinions which have been gen- 
erally received and long established, is an Under- 
taking that will always be sure to meet with 
Opposition and Censure; as it is not only the 
Author of such Opinions, bid many of those who have con- 
curred in them, that are apt to think themselves affected by it. 
It is this Consideration, together with Mr. Locke's eminently 
distinguished Abilities, and truly great Character, that makes 
me unwilling to call in Question, so long after his Death, any 
part of what he has wrote; but as it is upon a Subject of gen- 
eral Concern which cannot be too particularly considered; I 
hope, those who have already approved of what that Gentleman 
has said concerning Interest, will not disapprove of what I 
have wrote, unless it be for some weightier Reason, than that 
of differing from him; which, with the candid Part of the 
World, will not, I flatter myself, be looked upon as any want 
of Respect for his Memory; for there are few, if any, who have 
a greater Veneration for it, || than myself; and though I can- iv Pref. 
not agree with him in every 'Particular, yet I think, the great- 
est Part of what he has said upon Coin, and Commerce, is 
unanswerable. 

Every one who is acquainted with Mr. Locke's Works must 
be satisfied, he was too great a Lover of Truth, to object 
against an Inquiry into any Thing he wrote; and I hope none 



10 



Preface 



will think me wrong m taking a Liberty which he Iwnself 
would have allowed, had he been living ; as I have made no 
other Use of it, than that of endeavouring to find out what the 
Bate of Interest depends on, which may possibly be in some 
Degree useful or satisfactory at this Time, to those who are 
inclined to employ their Thoughts that Way. 





AN 



ESSAY 

ON THE 

Governing Causes of the Natural Rate 
of INTEREST, kc. 




FTER Sir William Petty and Mr. Locke 
have said what governs the Rate of Interest, 
any further Considerations on the Subject 
may perhaps be thought unnecessary; 
whether they really are so or not, I will not 
say, but shall leave every one to judge for 
themselves, when they have read the following Observations 
upon the Sentiments of those gentlemen, which I have here 
collected, and shall refer to by Figures, as often as I have 
Occasion to mention them.|| i 

Extracts from Sir William Petty's Political Arithmetich, and 
Mr. Locke's Treatise on Interest, &C 1 

From Sir W. Petty's Political Arithmetic^, Third Edition, 
printed in the Year 1699. 2 

" 1. As to Money, the Interest thereof was within this fifty 
" Years,* at 10Z. per Cent, forty years ago, at 8?. and now at 



* Interest was reduced by Law from 10 to 8 per Cent. Anno 1623, 
and from 8 to 6 per Cent, in 1660. 



12 Joseph Massie 

" 61. no Thanks to any Laws which have been made to that Pur- 
" pose, for as mnch as those who can give good Security, may 
" now have it at less : But the natural Fall of Interest, is the 
" Effect of the Increase of Money." Chap. 6. page 259. 

From Mr. Locke's Treatise on Interest, &c. 3 

" 2. By natural Use, I mean that Bate of Money, which the 
"present Scarcity of it makes it naturally at, upon an equal 
" Distribution of it." Folio Edition of his Works, printed in 
1740. Vol. 2. Page 6. 

" 3. Now, I think, the natural Interest of Money is raised 
" in two Ways. First, When the Money of a Country is but 
" little, in Proportion to the Debts of the Inhabitants, one 
" amongst other. For, suppose Ten Thousand Pounds were 
" sufficient to manage the Trade of Bermudas, and that the 
"ten first Planters carried over Twenty Thousand Pounds, 
"which they lent to the several Tradesmen and Inhabitants 
7 "of the Country, who living above their Gains, || had spent 
" Ten Thousand Pounds of this Money, and it were gone out 
" of the Island : 'Tis evident, that, should all the Creditors at 
" once call in their Money, there would be a great Scarcity of 
" Money, when that, employ'd in Trade, must be taken out of 
"the Tradesmen's Hands to pay Debts; or else the Debtors 
"want Money, and be exposed to their Creditors, and so 
" Interest will be high. But this seldom happening, that all, 
" or the greatest Part of the Creditors, do at once call for 
" their money, unless it be in some great and general Danger, 
" is less and seldomer felt than the following, unless where the 
" Debts of the People are grown to a greater Proportion ; for 
" that, constantly causing more Borrowers, than there can be 
" Lenders, will make Money scarce, and consequently Interest 
" high. 

"Secondly, That which constantly raises the natural In- 
" terest of Money, is, when Money is little, in Proportion to 
" the Trade of a Country. For in Trade, every Body calls for 
" Money, according as he wants it, and this Disproportion is 



The Natural Rate of Interest 13 

" always felt. For, if Englishmen owed in all but one Million, 
" and there were a Million of Money in England, the Money 
" would be well enough proportion'd to the Debts ; but, if two 
" Millions were necessary to carry on the Trade, there would be 
" a Million wanting, and the Price of Money would be raised, 
" as it is of any other Commodity in a Market, where the 
" Merchandize will not serve half the Customers, and there 
" are two Buyers for one Seller." Page 6. 

" 4. The lowering of Interest to 4 per Cent, will be a Gain to 
" the borrowing Merchant. For, if he borrow at 4 per Cent. 
11 and his Re || turns be 12 per Cent, he will have 8 per Cent. \ 
" and the Lender Four : Whereas now they divide the Profit 
" equally as 6 per Cent." Pag. 7. 

" 5. For no Country borrows of its Neighbours, but where 
" there is need of Money for Trade ; no Body will borrow more 
" of a Foreigner, to let it lie still." 'Pag. 9. 

" 6. So that, if the Merchant's Return be more than his 
"Use (which 'tis certain it is, or else he will not trade, &c.)" 
Pag. 9. 

" 7. It cannot well be thought, that less than one fiftieth 
" Part of the Labourer's Wages, one fourth Part of 
" the Landholder's yearly Revenue, and one twentieth Part 
" of the Broker's * yearly Returns in ready Money, will 
" be enough to drive the Trade of any Country. At least, to 
" put it beyond Exception low enough, it cannot be imagin'd 
" that less than one Moiety, of this, i. e. less than one hun- 
" dredth Part of the Labourer's yearly Wages, one eighth Part 
" of Landholder's yearly Revenue, and one fortieth Part of the 
" Broker's yearly Returns, in ready Money, can be enough to 
" move the several Wheels of Trade, and keep up Commerce, 
" in that Life and thriving Posture it should be ; and how 
"much the ready Cash of any Country is short of this Pro- 
" portion, so much must the Trade be impair'd and hinder'd 
" for want of Money." Pag. 15. 

* Tradesmen. 



14 Joseph Massie 

" 8. It may then so happen at the same Time, that half an 
" Ounce of Silver, that the Year before would buy one Bushel 
" of Wheat, will this year buy but one tenth of a Bushel ; half 
" an Ounce of Silver, that the Year before would have bought 
"three Bushels of Oats, will this Year still buy one Bushel; 

«* " and at the same || Time half an Ounce of Silver, that would 
"the Year before have bought fifteen Pounds of Lead, will 
" still buy the same Quantity. So that at the same Time Sil- 
ver, in respect of Wheat, is nine tenths less worth than it 
"was, in Bespect of Oats two Thirds less worth, and in Re- 
" spect of Lead as much worth as before. The Fall, therefore, 
"or Rise of Interest, making immediately, by its Change, 
"neither more nor less Land, Money, or any Sort of Com- 
" modify in England, than there was before, alters not at all 
" the Value of Money in Reference to Commodities. Because 
"the Measure of that is only the Quantity and Vent, which 
" are not immediately changed by the Change of Interest. So 
" far as the Change of Interest conduces, in Trade, to the 
"bringing in, or carrying out Money, or Commodities, and 
" so in Time to the varying their Proportions here in Eng- 
" land, from what it was before ; so far the Change of Interest, 
" as all other Things that promote, or hinder Trade, may alter 
" the Value of Money, in Reference to Commodities." 'Page 
17. 

9. First, " That the Value of Land consists in this, that, by 
"its constant Production of saleable Commodities, it brings 
" in a certain yearly Income. Secondly, The Value of Com- 
" modifies consists in this, that as portable and useful Things, 
" they, by their Exchange or Consumption, supply the Neces- 
" saries, or Conveniences of Life. Thirdly, In Money there is 
"a double Value, answering to both of these; 1. As it is 
" capable, by its Interest, to yield us such a yearly Income : 
" And in this it has the Nature of Land, (the Income of one 
" being called Rent, of the other Use) Page 17, 18. 2. Money 

10 "has a Va II lue, as it is capable, by Exchange, to procure us 



The Natural Eate or Interest 15 

" the Necessaries;, and Conveniences of Life, and in this it has 
" the Nature of a Commodity." Page 18. 

10. " Money therefore, in buying and elling, being perfectly 
" in the same Condition with other Commodities, and subject 
" to all the same Laws of Value ; let us next see how it comes 
" to be of the same Nature with Land, by yielding a certain 
" yearly Income, which we call Use or Interest. For Land 
" produces naturally something new and profitable, and of 
" value to Mankind ; but Money is a barren Thing, and pro- 
" duces nothing, but by Compact, transfers that Profit, that 
" was the Eeward of one Man's Labour, into another Man's 
" Pocket. That which occasions this, is the unequal Distri- 
" bution of Money ; which Inequality has the same Effect too 
" upon Land, that it has upon Money. For my having more 
" Money in my Hand than I can, or am disposed to use in 
"buying, or selling, makes me able to lend: And another's 
" Want of so much Money as he could employ in Trade, makes 
" him willing to borrow. But why then, and for what Con- 
" sideration doth he pay Use ? For the same Eeason, and upon 
" as good Consideration, as the Tenant pays Eent for your 
" Land. For as the unequal Distribution of Land, (you hav- 
" ing more than you can, or will manure, and another less) 
" brings you a Tenant for your Land ; and the same unequal 
" Distribution of Money (I having more than I can, or will 
" employ, and another less) brings me a Tenant for my 
" Money : So my Money is apt in Trade, by the Industry of 
" the Borrower, to produce more than 6 per Gent, to the Bor- 

" rower, as well as your Land, by the Labour of the Tenant, || n 
" is apt to produce more Fruits, than his Eent comes to ; and 
" therefore deserves to be paid for, as well as Land, by a yearly 
" Eent." Pag. 19. 

11. "It being only the Change of the Quantity of Wheat to 
" its Vent, supposing we have still the same Sum of Money in 
'•'the Kingdom; or else the Change of the Quantity of our 
" Money in the Kingdom, supposing the Quantity of Wheat, 
" in Eespect to its Vent be the same too, that makes the 



1G Joseph Massie 

" Change in the Price of Wheat. For if you alter the Quan- 
" tity, or Vent, on either Side, you presently alter the Price, 
" but no other Way in the World." Page 21. 

12. "That, which raises the natural Interest of Money, is 
" the same that raises the Pient of Land, i. e. its Aptness to 
" bring in yearly to him that manages it, a greater Overplus 
" of Income, above his Pent, as a Keward to his Labour. That, 
" which causes this in Land, is the greater Quantity of its 
" Product, in Proportion to the same Vent of that particular 
" Fruit, or the same Quantity of Product, in Proportion to a 
"greater Vent of that single Commodity; but that, which 
" causes Increase of Profit to the Borrower of Money, is the 
"less Quantity of Money, in Proportion to Trade, or to the 
" Vent of all Commodities, taken together, and vice versa. 

" The natural Value of Money, as it is apt to yield such an 
"yearly Income by Interest, depends on the whole Quantity 
" of the then passing Money of the Kingdom, in Proportion to 
" the whole Trade of the Kingdom, i. e. the general Vent of all 
" the Commodities. But the natural Value of Money, in ex- 
" changing for any one Commodity, is the Quantity of the 
12 "trading Money of the Kingdom, designed for that || Com- 
" modity, in Proportion to that single Commodity and its 
" Vent. For though any single Man's Necessity and Want, 
" either of Money, or any Species of Commodity, being known, 
" may make him pay dearer for Money, or that Commodity ; 
" yet this is but a particular Case, that does not at the same 
" Time alter this constant and general Kule." Page 24. 

13. " That supposing Wheat a standing Measure, that is, 
" that there is constantly the same Quantity of it, in Propor- 
" tion to its Vent, we shall find Money to run the same Variety 
" of Changes in its Value, as all other Commodities do. Now 
" that Wheat in England does come nearest to a standing 
" Measure, is evident by comparing Wheat with other Com- 
" modifies, Money, and the yearly Income of Land, in Henry 
" the Seventh's Time, and now. For supposing that Primo 
"Hen. 7 N. let 100 Acres of Land to A. for 6d per Annum, 



The Natural Rate of Interest 17 

" per Acre, Rack-Bent, and to B. another 100 Acres of Land, 
"of the same Soil and yearly Worth with the former, for a 
" Bnshel of Wheat per Acre, Back-Rent, (a Bushel of Wheat 
"about that Time, being probably sold for about 6d.) it was 
" then an equal Bent. If, therefore, these Leases were for 
" Years yet to come, it is certain that he, that paid but 6(7. 
" per Acre, would pay now 50s. per Annum, and he that paid 
" a Bushel of Wheat per Acre, would pay now about 25/. per 
" A nnum which would be near about the yearly Value of the 
" Land, were it to be let now. The Reason whereof is this, 
" that there being ten Times as much Silver now in the World 
" (the Discovery of the West-Indies having made the Plenty) 
" as there was then, it is nine Tenths less Worth now, than it 
" was at that Time; that is, it || will exchange for nine-Tenths 13 
" less of any Commodity now, which bears the same Propor- 
" tion to its Yent, as it did 200 Years since ; which of all other 
" Commodities. Wheat is likeliest to do. For in England, and 
" this Part of the World, Wheat being the constant and most 
" general Food, not altering with the Fashion, not growing by 
" Chance ; but as the Farmers sow more or less of it, which 
" they endeavour to proportion, as near as can be guessed, to 
" the Consumption, abstracting the Overplus of the precedent 
"Year, in their Provision for the next; and vice versa; it 
" must needs fall out, that it " keeps the nearest Proportion 
" to its Consumption (which is more studied and designed in 
"this, than other Commodities) of any Thing, if you take it 
" for 7 or 20 Years together : Though perhaps the Plenty, or 
" Scarcity of one Year, caused by the Accidents of the Season, 
" may very much vary it from the immediately precedent, or 
" following. Wheat, therefore, in this Part of the World, (and 
" that Grain, which is the constant general Food of any other 
" Country) is the fittest Measure to judge of the alter'd Value 
" of Things, in any long Tract of Time." Page 24, 25. 

14. " For, supposing the Balance of Trade to be equal be- 
" tween England and Holland, but that there is in Holland a 
"greater Plenty of Money than in England (which will ap- 



18 Joseph Massie 

" pear by the Lowness of the natural Use in Holland, and the 
" Heighth of the natural Use in England; &c." Page 27. 

15. " ; Tis seldom a thriving Man turns his Land into 
" Money, to make the greater Advantage : The Examples of it 

14 " are so rare that they || are scarce of any Consideration in the 
" Number of Sellers. 

" This, I think, may be the Reason, why in Queen Eliza- 
" betlis Days, (when Sobriety, Frugality, and Industry, 
" brought in daily Increase to the growing Wealth of the King- 
" dom) Land kept up its Price, and sold for more Years Pur- 
" chase, than corresponded to the Interest of Money, then 
" busily employed in a thriving Trade, which made the natural 
" Interest much higher than it is now, as well as the Parlia- 
" ment then set it higher by Law." Pag. 28. 

" 16. High Interest is thought by some a Prejudice to 
" Trade : but if we look back, we shall find, that England 
"never throve so well, nor was there ever brought into Eng- 
" land so great an increase of Wealth since, as in Queen Eliza- 
" beth's and King James I. and King Charles I. Time, when 
" Money was at 10 and 8 per Cent. I will not say high In- 
" terest was the Cause of it; for I rather think that our thriv- 
" ing Trade was the Cause of high Interest, every one craving 
" Money to employ in a profitable Commerce." Pag. 34. 

17. " Indeed, I grant it would be well for England, and I 
"wish it were so, that the Plenty of Money were so great 
" amongst us, that every Man could borrow, as much as he 
" could use in Trade, for 4 per Cent, nay, that Men could bor- 
" row as much as they could employ for 6 per Cent. But even 
" at that Rate, the Borrowers already are far more than the 
" Lenders." Pag. 39. 

It appears from these several Extracts, that Mr. Locke 
attributes the Government of the natural Rate of Interest to 
the Proportion which the Quantity of Money in a Country 
bears to the Debts of its Inhabitants one amongst another, 

15 and || to the Trade of it; and that Sir William Petty makes it 
depend on the Quantity of Money alone ; so they only differ in 



The Natural Kate of Interest 19 

regard to Debts; for though they express themselves differ- 
ently concerning Money, yet it is plain they mean one and the 
same Thing. 

Mr. Lodce also mentions the Profits of Trade as instru- 
mental in raising Interest, for Extract 16, he accounts for the 
high Eate of Interest in Queen Elizabeth's Eeign, by the 
Profits of Trade ; but then he subjects them to the Proportion 
which the Quantity of Money bears to Trade: For (Extract 
12.) he says, "That which causes Increase of Profit to the 
" Borrower of Money, is the less Quantity of Money, in pro- 
portion to Trade, or to the Yent of all Commodities taken 
" together, and vice versa, &c." From whence it is evident he 
thought the Proportion which Money bore to Trade, not only 
governed Interest, but the Profits of Trade likewise. 

These are the Sentiments of those Gentlemen, and these 
would have been mine, had Experience even left the Matter 
doubtful : But when I found Mr. Locke's Position relating 
to the Proportion of Debts clash' d with Facts it should have 
agreed with, and the principal Position, concerning the Pro- 
portion of Money, contradicted by the very kind of Expe- 
rience which Mr. Locke himself points out as the best, I could 
not help differing from them. 

ON THE PROPORTION OF DEBTS. 

" Now I think the Natural Interest of Money is raised two 
" ways : First, When the Money of a Country is but little, in 
" Proportion to the Debts of the Inhabitants one amongst 
"another." (Extract 3.) \\ 16 

If Debts had so considerable an Influence over Natural 
Interest, as Mr. Locke attributes to them, one might reason- 
ably expect to have found the present Eate of it more than 
half what is was 150 Years ago: For if the Debts which were 
then owing by the Inhabitants of this Island, one among an- 
other, were a principal Cause of Interest being so high as 10 
per Cent, per Annum, the Alterations which have since hap- 



20 Joseph Massie 

pened here in that Respect, as well in private as publick Af- 
fairs, are Arguments for its being above, and not below, that 
Eate. 

Luxury and Extravagance are much more general among 
private People now, than they were formerly; and these can- 
not increase, without producing an Increase of Debts; and the 
State of the Nation, in respect of publick Debt, is worse than 
it was 150 Years ago, almost beyond Comparison: For then 
the publick Revenues commonly defrayed the current Ex- 
pences; whereas now, by frequent Mortgages, the Publick is, 
and has been for many Years, at least twice as much Money in 
debt, as there ever was supposed Specie in the Nation at any 
one Time to pay ; the greater Part of which is, no doubt, 
owing to the Inhabitants of this Country: So that if any 
Inference is to be made concerning the present Rate of In- 
terest, from a Comparison of the publick and private Debts of 
this Age, with those of our Ancestors, it should, according to 
Mr. Lode's Rule, be higher than it was 150 Years ago. It 
does not seem extravagant to suppose such a Load of Debts as 
this, must have raised Interest to 20 per Cent, but no one 
could well imagine it to be less than 15 per Cent, which being 
full three times as much as has for many Years been paid for 
Interest, sufficiently demonstrates how little the Debts of 
17 People, one amongst || another, have to do with the Rate of 
Interest in the Country wherein they live, for any considerable 
Tract of Time. jSTor will taking the Position in a more lim- 
ited Sense, make much Difference; for we see that notwith- 
standing the national Debt has increased from forty-five to 
seventy-eight Millions since the Year 1740, (according to a 
State of it lately published in a Pamphlet, entitled, Considera- 
tions upon- a Reduction of the Land-Tax) 1 the Rate of Interest 
among private People in general, is now much the same as it 
was at that Time : It is indeed somewhat higher to the Gov- 
ernment than it was ten Years ago, the Reason of which I shall 
endeavour to shew, when I come to speak of publick Credit: 
At present I shall only say, that suddenly collecting great 



The Natural Eate or Interest 21 

Sums of Money does undoubtedly at the Time, raise the Eate 
of Interest with Numbers of private People; just as buying 
great Quantities of Wheat raises the Prjce of that particular 
Commodity : And thus far I agree with Mr. Locke : But it 
is manifest from what lias been said, that when the Demands 
which occasioned such Eise is satisfied, Interest soon returns 
to its natural Eate: For the Price which Money bears in 
Times of general Danger, or publick Necessity, cannot be 
ealPd so, any more than the Price which a Man agrees to give 
for Wheat can be called the natural Price for it, when the 
Seller takes an Advantage of the Buyer's Necessity, or can- 
not have the Assistance of Law to oblige him to pay for it. 

It may possibly be remarked by some, that I have extended 
Mr. Locke's Position further than he designed, by bringing in 
publick Debts; but the Extension is only in Words, and not in 
Fact ; for he says, " The Debts of the Inhabitants one amongst 
"other;" and what the Publick owes || to private People 18 
here, or rather, what one Part of the Nation owes to the other, 
is as much a Debt of this Sort, as any that can be named, and 
only differs from other Debts in having a great Number of 
People engaged for the Payment of it, instead of one, or a few. 

As to the Supposition which Mr. Locke has made to support 
his Opinion, concerning the Influence of Debts in this Ee- 
spect, I must beg Leave to say, I neither think it right, nor 
can agree with him in his Conclusion. 

It is natural enough to suppose the ten first Planters who 
went to the Island of Bermudas, might carry with them 20,000 
/. not knowing what Sum of Money would be wanted to carry 
on the Trade of the Island ; but then, it is as natural to think, 
that when they came there, and found they had brought twice 
as much Money as could be employed, they would send back one 
half of it to their Mother Country, or to some other Colony 
or Place where Employment could be found for it : For where 
is the Country that keeps ten Millions of Money at home, 
when only five of them are wanted, without lending the Over- 
plus to Foreigners, as we know the Dutch and Swiss do? Or 



22 Joseph Massie 

where is the Merchant, Planter, Farmer, or Tradesman, who 
having 2000 I. and can only find Employment for 1000 I. does 
not lend the other to- some of his Neighbours, or lay it out in 
a Purchase? Certainly no Man can be thought to act so im- 
prudently, much less any Number of Men, or a whole Nation. 

But if these Planters should act so contrary to their In- 
terest, as to keep the whole 20,000 I. in the Island, it would be 
impossible for them to lend it all at Interest, unless the In- 
habitants are to be supposed void of common Understanding, 
I9which||is what any Man must be who will pay Interest 
for 200 I. when he wants only 100 I. and yet this is what must 
be done in order to the whole 20,000 I. being lent among the 
People of the Island. It is therefore morally impossible this 
Part of Mr. Locke's Supposition should ever be the Case any 
where; nor is it agreeable to what he himself has in another 
Place mentioned: For he says, {Extract 5.) "That no Coun- 
" try borrows of its Neighbours, but where there is Need of 
" Money for Trade : No body will borrow more of a Foreigner 
to let it lie still." And to this may be added, That no body 
will borrow of a Neighbour to let it lie still ; for borrowing or 
not borrowing, depend not upon those who are able lend, being 
Foreigners or of the same Country, but upon the Want of 
Money, which, when Men have occasion for it, they will be 
glad to get from Foreigners who can lend; but they will not 
pay Interest for it to their Neighbours, unless they are under 
a Necessity of doing so. 

It does not appear from the other Part of the Supposition 
concerning Extravagance, whether Mr. Locke means it of 
every individual Borrower of Money, or of only the greater 
Part of them ; nor is it indeed very essential to know in which 
Sense it was used, for though the Latter is most probable, be- 
cause it is the fairest, yet in Eespect of the Conclusion it is 
much the same, whether it be understood in the one Sense or 
the other. I take it for granted therefore, that it is a general 
Extravagance, but not an universal one, which is there meant ; 
in this Sense then let us inquire what Conclusions, concerning 



The Natural Eate of Interest 23 

an Alteration in the Rate of Interest, can be justly made from 
the Case supposed; which is, that ten of the 20,000 I. before- 
mentioned, were spent and gone out of the Island, || by the 20 
People, to whom it was lent, living above their Gains. 

Mr. Locke says, (Extract 3.) " 'Tis evident, that should all 
" the Creditors at once call in their Money, there would be a 
" great Scarciry of Money, when that employed in Trade must 
" be taken out of the Tradesmens Hands to pay Debts ; or else 
" the Debtors want Money, and be exposed to their Creditors, 
" and so Interest will be high." That Money would be scarce 
among such of these People as were called upon to pay their 
Debts, is undoubtedly true ; for so it must needs be with a Man 
who owes 200 I. and has got only 100 I. to pay it with; and 
that the Prasmium for Money lent such Men will be high, is 
very certain : But there is a Necessity of having better Proof 
than this, to shew that Interest will be high; because part of 
the Prasmium which Lenders receive under the Name of In- 
terest, is, in all Cases where there is Danger of losing, a Pras- 
miura of Risque, and not of Use ; and there being a very great 
Risque of losing where Borrowers have, by their Extravagance, 
spent one half of what is lent them, a considerable Part of the 
Praemium paid for Money by such Borrowers, is certainly a 
Praemium of Indemnity, and not of Use; and to call it In- 
terest, is as improper as it would be to call that Praemium 
Interest, which a Merchant gives an Insurer to have his Ship 
or Merchandise insured against the Dangers of the Sea or 
Enemies : So that what is here disguised under the Name of 
high Interest, is in Fact no such Thing, but a Praemium of 
Use and Risque joined together; which may just as well be 
called high Insurance as high Interest, for it is as much the 
one as the other. || ai 

If then the Praemium paid for Money by these extravagant 
Men, in the Case before-mentioned, is to be called Interest, 
and introduced as the Standard of it, there must first be taken 
from it so much as the Lenders receive for the Risque they 
run of losing what they lend, before it can be admitted into 



24 Joseph Massie 

Account; and it is easy to fix what this is at all Times, when 
we know at what Rate a Gentleman can borrow Money upnn 
his Land, or a reputable Merchant or Tradesman upon his 
Bond or Note, (which I take to be the Standards for deter- 
mining the Rates of Interest upon real and personal Securi- 
ties) for we need only subtract from the Rates paid by other 
People, the Rates paid by the Gentleman, Merchant, or 
Tradesman, and the Remainders will be the Praemia of Risque ; 
and when this Method has been taken with the Praemia 
paid by the Inhabitants of Bermudas, we shall then have the 
true Rate of Interest. 

Suppose then, that the 20,000 I. brought there by the first 
ten Planters, was originally lent to the Tradesmen and Inhabi- 
tants of the Country at 5 per Cent, per Annum, but that the 
Planters, upon calling for their Money, and finding half of it 
spent, and gone out of the Island, should directly insist upon 
having an additional Praemium of 5 per Cent, from all those 
People who had spent half, or more, of what they had bor- 
rowed; would it be just to say Interest was raised to 10 per 
Cent, f Certainly not ; the Contrary is evident, not only from 
what has been already said, but also from the Rate at which 
the honest and prudent Part of the Inhabitants would still be 
able to borrow Money; which is the old Rate of 5 per Cent. 
for if People's being in debt twice as much as they are able 
to pay, is to be assigned as a Reason for Interest rising, this 
22 Rise must certainly be confined to such extravagant || People, 
and cannot at all affect others, who have lived within their 
Gains, and are able to pay their Debts, though perhaps not 
without great Detriment to their Affairs : And therefore of 
this high Praemium of 10 per Cent, paid for Money by the 
Extravagant, which, according to Mr. Locke is all to be called 
Interest, there is only one half of it really so, the other half 
being a Premium of Risque or Insurance, and not of Use; 
and consequently his Conclusion that Interest will be high in 
this Case, must be wrong. 



The Natural Rate of Interest 25 

It cannot be right to argue about Interest, from the Prsemia 
which such Men pay for Money, because that is introducing 
Dishonesty, or Extravagance where their Contraries are al- 
ways understood to be, when there is only personal Security 
given; as it is essential to lending upon such Security, that 
there be a moral and trading Certainty of Repayment, which 
cannot be, where Dishonesty or Extravagance prevail; and 
therefore all Risque, more than what is unavoidably produced 
by the Mutability of human affairs, must either be intirely 
excluded in all Considerations relating to Interest, or there 
will be a Necessity for allowing, there are, or may be, as many 
different Rates of it in a Country, at one and the same Time, 
as there are Chances of being paid or not paid, between an 
absolute Certainty of the one and the other; for by the same 
Rule that any one Degree of Extravagance is admitted into 
the Account, all others must; the Absurdity of which is ob- 
vious to every one. 

The Rate of Interest in Great-Britain for Money lent upon 
personal Security, is at present about 5 per Cent, but if In- 
quiry was to be made about the Rate of it, among such sort of 
People as had borrowed Money on their personal Securities 
to employ in Trade, and spent one half of it, there || is 23 
Reason to believe, they would say it was more. than 5 per Cent. 
or rather, that No-body would trust them with any; one of 
the two it is certain must happen, and which ever it be, it will 
shew the Case Mr. Locke has put, will not admit of the Con- 
clusion he has made. 

If such People as these should not be able to borrow Money, 
as is most probable they would not, it cannot be right to sup- 
pose them doing what is not in their Power ; and that borrow- 
ing of Money, or keeping longer the Remainder of what they 
had before borrowed, would be so, is evident from the general 
Practice of Mankind : For what Man will lend Money upon 
personal Security to any one, avIio he knows has been so ex- 
travagant as to spend half of a Sum he had before borrowed 
of another Person? Or what Creditor Avbo finds half of a 



26 Joseph Massie 

Sum he has lent, squandered away by the Extragavance of a 
Borrower, will suffer himself to be amused with a Promise of 
being paid higher Interest, (if the Law did not forbid taking 
above 5 per Cent.) and not secure by the Help of Law, that 
half of his Money which is still in his Power to get ? Eeason 
and Experience shew, there neither are, nor can be, any such 
Men ; or at least, that there is not a Number of them sufficient 
to justify quoting their Conduct as the general Practice of the 
World. 

Much Borrowing and Lending among the Inhabitants of a 
Country, is not the Effect of a Want or Scarcity of Money, but 
of an unequal Distribution of it; when the Eiches of a Coun- 
try are collected into a few Hands, much borrowing naturally 
follows, for Affluence of Fortune induces most Men to think 
of Ease and Pleasure; to procure which, instead of employing 
their Money themselves, they must let it out to other People 
for them to make Profit of, reserving for the Owners a 
24 Pro || portion of the Profits so made: But when the Eiches 
of a Country are dispersed into so many Hands, and so equally 
divided, as not to leave many People enough to maintain two 
Families, by employing it in Trade, there can be little borrow- 
ing; for 20,000 I. when it belongs to one Man, may be lent, 
because the Interest of it will keep a Family, but if it belongs 
to ten Men, it cannot be lent, because the Interest of it will 
not keep ten Families. 

It may possibly be said, Quantity of Debts must have an 
Influence over the Eate of Interest, because the Government 
during the two last Wars, paid dearer almost every successive 
Year, for the Money borrowed upon the publick Eevenues : I 
grant the Government did do so; but at the same time I can- 
not think, this Eise of Interest was owing to an Increase of 
Debts, for then it must have continned high, till they were 
discharged ; which it has not clone, but fallen again soon after 
Peace was restored, it will be necessary therefore to look for 
some other Eeason than Quantity of Debts, to account for the 
Government's having paid dearer for Money, as that will not 
explain the Matter. 



The Natural Kate of Interest 27 

Publick Faith is like a Merchant, whose Credit falls and 
rises, as his Trade declines or prospers : When the Nation is 
engaged in a general War, and the Event of it seems likely to 
be unsuccessful, or remains doubtful, publick Credit will sink, 
and sometimes even below that of a private Gentleman or 
Merchant, as it did in the Eeign of King William, and in the 
last Eebellion in the Year 1745, when the Government paid 
dearer for Money than private People did; and for very 
natural and obvious Eeasons; the Foundation of publick 
Credit, which is publick Security, was then attacked, not only 
by War abroad, but by Eebellion at home, and therefore from 
Appearances, monied Men at || that Time thought publick 25 
Security not so good as private; whether their Apprehensions 
were just or not, is by no means the Question ; it was sufficient 
if any of those who had Money to lend, imagined they were; 
and this, it is plain Numbers did, from the Government's 
having been able to borrow Money upon cheaper Terms, since 
the happy Defeat of the Eebels, 5 than was done in the Year 
1745, notwithstanding the Continuance of War with France 
and Spain, and an Increase of national Debt. 

If from this low Ebb of publick Credit, we take a View of it 
in Time of settled Peace, when both publick Safety, and the 
established Government, are far removed from all Appear- 
ances of Danger, it will be found high above, as it was before 
much below, private Credit : The Government will then be 
able to raise Money upon cheaper Terms, than either the 
Gentleman or the Merchant; not merely because the Security 
is better, but partly because it is far more extensively known 
than the Security given by private People. The Inhabitants 
of this Country in general, and those of many other Countries 
know, that publick Faith here has been kept sacred, and that 
what they lend up on it, is as secure, if not more so, than it 
can be in any other Country ; and this, together with the lower 
Eate of Interest in Holland, and other Countries, is what has 
enabled the Government to borrow Money in Time of Peace, 
and even sometimes in War, cheaper than private People here 



28 Joseph Massie 

can, or in other Words, below the natural Rate of Interest in 
this Country. 

What has been said of the Government, is also in some 
Degree applicable to the East-India Company, whose Credit 
is so well established as to enable them to borrow Money 

26 cheaper the than pri || vate Merchant, landed Gentleman, or 
even the Government, can do ; to this it is true, the Condition 
on which their Bonds are issued *, contributes more than a 
little, for they may be esteemed ready Cash running at In- 
terest, and consequently are a great convenience to Bankers, 
and many other monied Men, who cannot suffer, or do not 
chuse, to have their Money engaged so as not to be able to com- 
mand it immediately, or at a short Notice : The Want of this 
Convenience would oblige such People to keep large Sums by 
them in Specie unemployed, or might probably compel them, 
either to enter more into Trade than they do now, or to supply 
others with Money for that Purpose, with more Eeadiness, and 
at more easy Bates than they do at present : But how far this 
Consideration may merit Attention at this Time, is not to my 
Purpose. 

Now I am speaking of the Government borrowing Money, I 
cannot omit mentioning the happy Effects which preserving 
publick Faith inviolable, has produced : I think it has done 
nothing less than saved the Nation from Ruin; for it seems 
difficult to conceive how the many millions of Money which 
have been borrowed to carry on the Wars of King William, 
Queen Anne, and his present Majesty could have been found, 
if the Dutch and others had not been able to lend, or how they 
could have been borrowed upon Terms that would not have 
involved the Nation beyond a Possibility of recovering by just 
Measures, if Interest had not been much lower in Holland than 

27 it was here; which, in this Respect, must be allow || ed to have 

* The East-India Company's Bonds are payable upon six Months 
Notice, and the Company receives them as Cash in Payment for 
Goods bought at their Sales, when six Months Interest is due upon 
them. 



The Natural Eate of Interest 29 

been highly advantageous to Great-Britain, however disad- 
vantageous it may have been with Begard to our Commerce : 
And there is no Doubt to be made, but that acting with the 
same Equity will always secure to this Nation the like Aid 
from Foreigners upon any future Emergency, which is very 
well Worth considering; for if ever publick Necessity, and a 
Distrust abroad, of this Government's being able or willing to 
preserve publick Faith, should make borrowing very large 
Sums of Money at Home, to carry on a foreign War, unavoid- 
able; it would cause such a Confusion in the Affairs of the 
Nation, as, I hope, will never be seen here, and might at last 
fall short of answering the present Necessity. 

But to return : I say it is owing to the bef orementioned 
Causes, that the Government has at one Time been able to 
borrow Money at 2 per Cent, below the legal Eate of Interest ; 
and at another Time been obliged to pay as much above it, 
when neither the landed Gentleman, Merchant, or Tradesman 
(who are the People to determine natural Interest by) have 
at the same Time paid more, nor above 1 per Cent, less than 
the legal Eate; and many People have paid invariably one and 
the same Eate, and this either one of those last mentioned, or 
some intermediate one for the whole Time; so that no In- 
ferences can justly be made from the Eate which the Govern- 
ment at any Time pays, as it oftner differs than agrees with 
the natural Eate of Interest here ; nor is it possible they should 
keep Pace together, for a formidable Eebellion, or a War which 
threatens a Change of Government, will sink publick Credit 
below that of private People, especially when great Sums of 
Money lye in the Hands of a few Men; as every || one who 28 
thinks at all about the Matter, naturally makes this Conclu- 
sion within himself, that Government cannot subsist unless 
Men's private Eights are in some Degree preserved; and that 
whatever Changes or Eevolutions of Government happen, his 
Estate or Fortune will never be taken from him, unless he has 
been very active on the losing Side of the Question ; and con- 
sequently, if he runs any Hazard of forfeiting his Estate, by 



30 Joseph Massie 

lending the Government Money, he will have a Praemium of 
Eisqne adequate to it, over and above his Interest. On the 
contrary in Times of Peace, or when there is no dangerous 
War carrying on, and Interest is lower in Holland, &c. than 
here, the Government will always be able to borrow Money 
lower than the natural Rate of Interest in this Country, so 
long as publick Faith is preserved inviolable, and the national 
Debt does not increase beyond a Probability of being dis- 
charged by a frugal Management of the publick Bevenues, for 
these are both essential to the Preservation of publick Credit, 
and though the Government has hitherto, and it is to be hoped 
always will, meet with a Degree of Confidence both at Home 
and Abroad, equal to the Justness of its Intentions ; yet these 
will always gain or lose Weight according as putting them in 
Execution becomes more or less easily practicable; for Men 
who lend, will be satisfied about the Ability as well as the 
Integrity of a Borrower, before they part with their Money, 
and will be sure to make him pay higher for it, when any 
Degree of Bisque appears, however just his Designs may be : 
And this is a Consideration, which, I am apt to think, will 
make some People less inclinable to take 3 per Cent. Interest 
for their Money from the Government now, than they were 
29 ten Years || ago, when the national Debt was above thirty 
Millions less. 

I know there are some People who lay great Stress upon the 
Payment of the national Debt, and say, if that was discharged 
it would make Interest much lower than it is at present, by 
bringing more Money into Trade ; but if we consider the Mat- 
ter a little, it will be found, that paying the Debt of the 
Nation will, in all Probability, raise, and not lower, the Eate 
of Interest; and instead of bringing more Money into Trade, 
will carry all, or most of that which is already in Trade, out 
of the Nation; for such Part of the publick Debt as is owing 
to Foreigners, must be paid by Coin, or Bullion, which must 
be sent from hence, or from other Countries that owe Money 
to this, for there is no other Way by which it can be paid. 



The Natural Eate of Interest 31 

Suppose then, that twenty Millions of the national Debt, 
due to the Dutch, Swiss, &c. is to be paid in twenty Years; 
this will not bring more Money into Trade, but take so much 
out of it, as there is little Eeason to think the general Bal- 
lance of Trade will answer the Deficiency of, especially when 
to this annual Export of a Million is added the Interest of 
what remains undischarged, which must be sent abroad as well 
as the other; so that till Foreigners are repaid all they have 
lent the Nation, Interest must rather rise than fall, by lessen- 
ing the national Debt, if it has any Dependence on the Quan- 
tity of Money employed in Trade. 

Nor can I find there is any Reason to expect, that when this 
Part of the publick Debt is discharged, the Payment of the 
other Part, due to People in Great Britain, will cause any Fall 
in the Eate of Interest; for it cannot bring more Money || ; 
into Trade than what is in the Nation, and all of that which 
belongs to it, and is intended to be so employed, is already in 
Trade. If indeed there were Mines of Gold and Silver in the 
Nation, from whence the Government could at pleasure extract 
a Quantity of those Metals, sufficient to pay what the publick 
owes to private People here, the Discharge of the national 
Debt would no doubt, bring more Money into Trade ; but since 
the Government has no such Mines, nor any Method of getting 
Money, but by Taxes, and Imposts levied upon land, or Com- 
modities produced, or consumed here, I cannot see how it can 
possibly bring more Money into Trade. 

This Debt can be paid by no other Method, but that of rais- 
ing more Money by Taxes, than what is sufficient to answer the 
publick Expences. Suppose then, that the State of the Nation 
was such as to admit of a Million of Money being raised every 
Year, more than the current Expences required ; and that this 
Million, so raised, was to be applied to pay off the national 
Debt ; What will follow from hence in Respect of the Quantity 
of Money employed in Trade? Not an Increase, nor yet a 
Decrease, but only that there will be just the same Sum as 
before ; so soon as the People who have received their Debts can 



32 Joseph Massie 

either lend their Money to others to trade with, or engage in 
Trade themselves ; for all the Difference which paying this Mil- 
lion of Money can make, is, a Change of Hands in Trade : Had 
it not been levied and consequently not paid, the Trade of the 
Nation would have been still carried on by the same People; 
but being paid, it will bring a Number of Men in Trade who 
were not engaged in it before ; and there will be Room for them 
and their Money, without depriving those of a Livelihood who 
31 were || before settled in Trade; though particular Hardships 
and Inconveniences will nevertheless be felt; for it is impos- 
sible to re-distribute this Money in Trade in the same manner 
as before, and consequently some of those who have received 
their Debts, will be at a Loss how to dispose of their Money; 
but most of all, the Widow and the Fatherless, who have no 
other Means of living than by the Interest of their Money : 
For they must be forced to seek private Securities, and hazard 
their all, upon the Honesty and Care of particular Men; and 
therefore it is much to be wished, that when the National Debt 
is discharged, there may be found some better kind of Security 
for this helpless Part of Society. 

From this Increase of Traders it may be thought, the Pay- 
ment of the publick Debt will lower the Eate of Interest, 
though it does not bring more Money into Trade; but if we 
consider, how much cheaper a Reduction of Taxes, will make 
the Commodities and Labour of this Country, than they are at 
present, and consequently how much greater the Demand will 
be for them abroad ; there will be little Reason to apprehend a 
Fall in the Rate of Interest; but on the contrary, rather a 
Rise, by increasing the Trade of the Nation be}^ond what the 
Payment of the national Debt, will increase the Number of 
Traders. 

All Reasoning about natural Interest from the Rate which 
the Government pays for Money, is, and unavoidably must be 
fallacious ; Experience has shewn us, they neither have agreed, 
nor preserved a Correspondence with each other; and Reason 
tells us they never can; for the one has its Foundation in 
Profit, and the other in Necessity; the former of which has 



The Natural Eate of Interest 33 

Bounds, but the latter none : The Gentleman who borrows 
Money to || improve his Land, and the Merchant or Trades- 32 
man who borrow to carry on Trade, have Limits beyond which 
they will not go; if they can get 10 per Cent, by Money, they 
may give 5 per Cent, for it; but they will not give 10; whereas 
he who borrows through Necessity, has nothing else to deter- 
mine by, and this admits of no Eule at all; the Law cannot 
govern where it prevails ; for if it could, the Government would 
never have gone beyond the Eule which is prescribed for 
private Men; but Necessity, whether publick or private, has 
no Law. 

From what has been said, I think it is evident, that neither 
publick nor private Debts, have raised, or can raise, the 
natural Eate of Interest, The next Thing to be considered, is, 
whether the Proportion which Money bears to Trade governs 
Interest : But previous to this, I cannot help remarking, that 
though Mr. Locke looks upon Debts as a principal governing 
Cause of the Eate of Interest, he nevertheless has Eecourse to a 
Scarcity of Money to account for that Eise, which, according 
to his Position, should be produced by the Quantity of Debts 
alone; for he says, (Extract 3.) " But this seldom happening, 
" that all, or the greatest Part, of the Creditors do at once call 
" for their Money, unless it be in some great and general 
" Danger, is less and selclomer felt, than the following, unless 
" where the Debts of the People are grown to a greater Propor- 
tion; for that, constantly causing more Borrowers than 
" there can be Lenders, will make Money scarce, and con- 
" sequently Interest high." Now if Debts have so great an In- 
fluence over the Eate of Interest as he attributes to them, what 
Occasion is there for bringing in a Scarcity of Money to their 
Aid? Or if it be a Scarcity of Money which || produces the 33 
Eise, and Debts have no other Concern in it, than as they 
contribute to produce a Scarcity of Money, why is that called 
Essential to the Eise of Interest, which is not so ? For Debt 
in this Case is not essential, since the same Scarcity of Money 
might have been, without any Increase of Debt; it is well 
known there are more Debts owing in Great-Britain and Hoi- 



34 Joseph Massie 

land, than there is Money to pay them with, and yet there is 
no Scarcity of Money in either Country; and it is obvious 
enough from past Experience, that an open Trade with France 
would cause a Scarcity of Money here, and yet it would not 
produce an Increase of Debt, (at least none that can be of 
Weight in this Case:) For the French would take care to be 
paid for all this Nation had from them; and it would be as 
much every Man's Care here, to be paid for what his Neigh- 
bours bought of him, as if there had been no such open Trade ; 
so that the Quantity of Debts in a Country cannot be an essen- 
tial governing Cause of Interest; if, according to what Mr. 
Locke says, they raise the Eate of it, by making Money scarce ; 
because there may as well be much Money where there is much 
Debt, as little Money where there is little Debt, and conse- 
quently, high or low Interest in either Case. 

Nor can I think the Scarcity of Money, which Mr. Locke 
has supposed to be in the Island of Bermudas, will admit of 
the Inference he has drawn from it, even though his Position 
was just; for though it be true that Money would be scarce 
there, yet, we must not mistake a particular Scarcity for a 
general one; for there is a vast Difference between only a 
Number of Borrowers wanting Money to pay their Creditors, 
and there being an universal Scarcity of Money among all 
34 Kinds of || People, as well those who are not Borrowers, as 
those who are. 

The first kind of Scarcity is to be found in all Countries, 
and at all Times, where there is any borrowing at all ; for Men 
don't borrow till they want, and consequently, if what they 
borrow is suddenly called for again, they must find Money 
scarce when they are to pay their Debts : Because by so doing, 
their Affairs will be again involved in that Confusion and 
Distress ; from which the Use of the Money borrowed would in 
time have relieved them; or they be brought into Difficulties, 
which, if they had not borrowed Money, they had never 
known ; and consequently Money being scarce with Borrowers, 
* when they are suddenly called upon to pay it, is no Argument 
for Interest being higher at one time than another. 



The Natural Eate of Interest 35 

The second kind of Scarcity is the only one which can be 
properly so called; for it would be unjust to say, there was a 
Scarcity of Money in Great Britain, because there are a Number 
of extravagant Borrowers in it, with whom Money is a scarce 
Commodity ; as it might by the same Eule be said, there was a 
Scarcity of Wheat in a plentiful Year, because a Number of 
People through Extravagance had not Bread to eat; and yet 
this is the kind of Scarcity which Mr. Locke says would raise 
the Eate of Interest; for he supposed, in the Case before- 
mentioned of Bermudas, that the 10,000 I. which remained 
in the Island, was sufficient to carry on the Trade of it, and 
consequently the Scarcity of Money must be confined to the 
extravagant Borrowers. 

Now by what means the Planters calling in this 10,000 I. 
could produce such a Scarcity of Money, as would raise the 
Eate of Interest (supposing it depended on the Quantity of 
Money) I am quite || at a Loss to determine; for Men who call 35 
in their Money, don't let it lie idle; but either lend it again to 
other People, or employ it in Trade themselves; one of which 
the Planters must be supposed to do; and the Quantity of 
Money circulating in the Island, being the same after, as be- 
fore the Eecall ; it would be quite indifferent in respect of the 
Eate of Interest, whether Peter and James, or Richard and 
Thomas were the Persons to whom it was lent ; or whether the 
ten Planters employed the greatest Part of it in Trade them- 
selves; As it is not calling Money out of Peter's and James's 
Hands, and putting it into Richard's and Thomas's, or taking 
it from a Borrower and returning it to a Lender, but taking 
it out of the Course of Circulation, or out of a Country, which 
makes Money scarce. 

ON THE QUANTITY OF MONET. 

" But the natural Fall of Interest, is the Effect of the 
" Increease of Money, (Extract 1.) 

" Secondly, That, which constantly raises the natural In- 
terest of Money, is, when Money is little, in proportion to 
"the Trade of a Country, (Extract 3.)" 



36 Joseph Massie 

" The natural Value of Money, as it is apt to yield such an 
"yearly Income by Interest, depends on the whole Quantity 
" of the then passing Money of the Kingdom, in proportion to 
" the whole Trade of the Kingdom, i. e. the general Vent of 
"all the Commodities, (Extract. 12.)" 

As the second of these Positions contains nothing but what 
is comprehended in the third, they might all three be con- 
sidered as one only; but since Mr. || Locke has introduced the 
Necessity of there being so much Money in a Country as will 
bear a certain Proportion to the Trade of it, I think it will be 
necessary to consider this Matter seperately ; for though it may 
be said he has fixed the Proportion, yet it is so done, that I 
believe no Man will from thence be able to find out what Sum 
of Money will be sufficient to manage the Trade of this, or, 
of any other Country; for either two, four, eight, or sixteen 
Millions, will do equally well, according to the Eules he has 
laid down, which are as follow, (Extract 7.) 

Less than one fiftieth Part of the Labourer's "Wages, one 
fourth Part of the Landholder's yearly Eevenue, and one 
twentieth Part of the Broker's yearly Returns in ready Money, 
cannot well be thought sufficient to drive the Trade of any 
Country ; but it cannot be imagined that less than one Moiety 
of this can be enough to move the several Wheels of Trade, 
and keep up Commerce in that Life and thriving Posture 
it should be, and how much the ready Cash of any Country is 
short of this proportion, so much must the Trade be impaired 
and hindered for Want of Money. 

Which of these Computations comes nearest to Truth, I will 
not undertake to determine, as Mr. Locke himself has not done 
it, nor is it material, but as one of them must be fixed on, I 
shall take the former. 

The Rule says, less than one fiftieth Part of the Labourer's 
W T ages, one fourth Part of the Landholder's yearly Revenue, 
and one twentieth Part of the Broker's yearly Returns in 
ready Money, cannot well be thought sufficient to drive the 
Trade of any Country; and the Conclusion which follows, is, 



The Natural Eate of Interest 37 

that how much the ready Cash of any Country is short of this 
Proportion, so much || the Trade be impaired and hindered 37 
for want of Money. 

I should be glad to know, what the fiftieth Part of the 
Labourer's Wages, the fourth Part of the Landholder's yearly 
Revenue, and the twentieth Part of the Broker's yearly Re- 
turns, are ; as the Money they came to, must either be a fixed 
and invariable Sum, or it will be impossible to find out by 
them, what Quantity of Money will drive the Trade of any 
Country; for if they vary, as every Man knows they do, the 
Proportion of Money which is to be determined by them, will 
vary also; and consequently the Rule will not enable one to 
find out how much Money will answer the Purposes of Trade. 

The fiftieth Part of a Labourer's Wages, may at one Time 
be Is. 3d. at another 2 s. 6d. at a third 5s. and at a fourth 10s. 
and so of the Landholder and Broker; and this or something 
near it, has been the Case in this Country in different Ages, 
as appears by Bishop Fleetwood's Chronicon Preciosum 6 : If 
therefore, according to Mr. Locke's Rule, we are to make 
Inquiry what Sum of Money will be sufficient to carry on the 
Trade of Great-Britain, the Answer will be, either two, four, 
eight, or sixteen Millions of Money; supposing that when the 
fiftieth Part of the Labourer's W T ages was Is. 3d. there were 
two Millions of Money current here, and that the Number of 
People, and Quantity of Trade were the same at all those 
different Periods, which must be admitted as well for him as 
me, though the Fact was otherwise. 

Proportion and Disproportion between the Money and 
Trade of a Country, are Things we may talk of, but it is to 
very little Purpose : For the Value of Money as an exchange- 
able Commo || dity, rising and falling according as its Quan-38 
tity alters, a greater Sum o f it will do nothing in the Payment 
of Labourer's Wages, Landholder's yearly Revenues, or 
Broker's trading, when Money is plenty, but what a lesser 
Sum will do as well when it is scarce; and consequently there 
is no saying where Proportion ends, or Disproportion begins, 
in this Case. 



38 • Joseph Massie 

If Gold and Silver would either feed or cloath Men, a cer- 
tain and determinate Quantity of them would always be 
wanted; and if the Quantity to be had differed from it, there 
would undoubtedly be a Disproportion; but Gold and Silver 
will neither do the one nor the other, nor answer any Purpose 
as Money to which a certain Quantity of them is essential; a 
Farmer who now a Days receives four Shillings for a Bushel 
of Wheat, has no Advantage from selling it at this Price, 
more than what a Farmer who lived two hundred Years ago, 
had from selling his Bushel of Weat for two Shillings; (sup- 
posing there was then so little Money in the Nation, as to 
make Wheat two Shillings a Bushel) for at that Time, two 
Shillings would go as far, in paying Labourers Wages, Pent 
of Land, or in providing a Man with Meat, Drink, or Cloaths, 
as four Shillings will now. It cannot therefore be justly said, 
there is no want of Money to carry on the Trade of the Nation 
at present, because there is twice as much current now, as there 
was two hundred Years ago; or that there was a Want of 
Money then, because there was only half as much current as 
there is now; the Truth is, that the then Inhabitants of this 
Island either did, or might, carry on as much home Trade with 
eight Millions of Money, as the present Inhabitants of it can 
now carry on with sixteen Millions; and to say otherwise, is 
39 to deny || that the Value of Money, as an exchangeable Com- 
modity, is governed by its Quantity. 

As to foreign Trade, there is little occasion for having 
Recourse to it in an Inquiry of this Sort; since, according to 
Sir William Petty 's Account, 7 the foreign Trade of this Nation 
scarcely makes a Sixth Part of its whole Trade ; so that what is 
true of home Trade, may be said to be true of the whole, as 
it is so of by far the greatest Part; and upon Enquiry it will 
be found, that this Nation, with only eight Millions of Money, 
would have more foreign Trade than with sixteen Millions; 
and whoever thinks otherwise, might, with as much Eeason 
think that making our Commodities cheaper, would not in- 
crease the Demand for them abroad. 



The Natural Eate of Interest 39 

The next Thing to be inquired into, is, whether the natural 
Eate of Interest in a Country, depends on the whole Quantity 
of the then passing Money in it, in Proportion to the whole 
Trade of it; or, in other Words, whether Interest does, and 
necessarily must, rise and fall in a Country, in Proportion as 
the Quantity of current Money in such Country diminishes 
or increases in respect of the Trade of it; for this is what Mr. 
Locke in effect says, (Extract 12) in the following Words, 
" But that which causes increase of Profit to the Borrower of 
" Money, is the less Quantity of Money in proportion of Trade, 
" or to the Vent of all Commodities taken together, and vice 
" versa." And this he lays down as a constant and general 
Eule; for in the same Extract he says, "That though any 
" single Man's Necessity and Want of Money, being known, 
" may make him pay dearer for it ; yet this is but a particular 
" Case, that does not at the same Time alter this constant and 
" general Eule." || 40 

The Method which Mr. Locke has made use of for determin- 
ing whether the Money in a Country increases or diminishes 
in respect of the Trade of it, by the Price of Wheat, I agree 
with him in thinking is the best, for the Eeasons he has given 
(See Extract 11 and 13) and for another Eeason which has 
started up since his Time, and this is, a great Increase of 
Taxes, which have very much raised the Prices of Commodities 
in general, but have affected none less than the Price of Wheat, 
which neither has any immediate Tax on it, nor is much in- 
fluenced by the Taxes on other Commodities ; and therefore is 
the most proper to shew how far the Quantity of Money in 
this Nation has altered with respect to the Trade of it; for 
there is no other Commodity of such general use as Wheat, 
which has been so little altered by Taxes. But the Misfortune 
is, that the Price of it has not been collected for so long a 
Series of Years as I could wish. 

Bishop Fleetwood has given the true Market Price of it for 
only sixty successive Years, commencing 1646, and ending 
1705 : He has indeed given the Prices of it at different Times 



40 Joseph Massie 

for about 500 Years before that Interval; but whoever observes 
the great Interruptions or Variations which there are in them, 
will I believe conclude they are of very little Service to the 
present Purpose : There is only one Part of them which can 
safely be quoted to shew the then Value of Money by the Price 
of Wheat: and this for about ten Years between 1444 and 
1460, in which 'it was neither very scarce nor very plentiful; 
and though the Houses of York and Lancaster were then at 
War, and there are some Interruptions of Time, yet as they 
are but small ones, I think this may be admitted into 
41 account. 1 1 

The Price of Wheat for about twenty Years last past I have 
collected; it is not so correct as I could wish, but it is near the 
matter; so that though we cannot from these Materials find 
out every successive Alteration which there has been in the 
Value of Money for the last 300 Years, we may nevertheless 
know the Value of it at five different Periods, which will be 
sufficient, as all the Alterations which are known to have been 
in the natural Bate of Interest in England come within that 
Term. 

The Price of Wheat per Quarter, at a medium, for ten 
years between 1444 and 1460 by Bishop Fleetwood's Account, 
was six Shillings and three pence, which sum of the Money 
then coined, was intrinsically worth Twlve Shillings and one 
Penny of our present Money, according to Martin Folkcs 
Esquire's Account/ in his Table of English Silver Coins, who 
makes the Value of the then nominal Pound Sterling, to be to 
that of the present one, as 1.937 to 1.000. 

The Price of Wheat per Quarter at a Medium of twenty 
Years commencing 1646, and ending 1665, was 21. 17s. 5d.j S 
of the Money then coined, which was exactly of the same Value 
as our present Money ; there having been no Alteration in the 
nominal pound Sterling since the forty third year of the Eeign 
of Queen Elizabeth. 

The price of it at a medium of twenty years beginning 1666 
and ending 1685, was 2 1. 6s. 3d.f per Quarter. 



The Natural Eate of Interest 41 

The price of it for the third twenty Years, from 1686 to 
1705, upon an Average, was 2 I. 5s. 9c?.f per Quarter. 

And the price of it at Bear Key for twenty years last past, 
has been at a Medium rather less than 1 I. 8s. 6d. per Quarter. 

These being the prices of Wheat for the several || Intervals 42 
of time beforementioned, we have from them the proportions 
which the Quantity of current Money in the Nation has borne 
to the Trade of it. 



rl7-i (-1444-1 fl460 

20 1646 1665, 

iX 20 [-Years from J if,66 UoJ ^85 } 

20 1686 1705 

UoJ U729J 11748J 



How far the Eate of Interest at tliese several Intervals has 
agreed with Mr. Locke's rule, will be very obvious from the fol- 
lowing Table; wherein I have inserted the legal Eate of In- 
terest, and also the natural Eate of it, which I have supposed 
to be one per Cent, lower as, it seems impossible to fix it 
exactly; for even at present, there is so much difference be- 
tween the Eates of Interest paid by private People ; and there 
may probably in Times past be Instances of greater differences, 
but it is reasonable to think they are equalled hj Numbers, 
having paid the legal Eate, (I mean by Agreement, and not 
by the Force of Law,) so that if we take it in general, one 
per Cent. Difference will be near the Truth, for the legal Eate 
has been made to follow the natural one. In this Table I have 
likewise inserted the Eate at which natural Interest should 
have been, if it had risen and fallen in proportion as the 
Quantity of Money altered in respect of the Trade of the 
Nation. And I think it will be necessary here to mention, the 
result of an Inquiry I made, in order to know whether the 
decrease of Money in proportion to Trade, indicated by the 
Fall in the Price of Wheat, was confirmed by any other Com- 
modity of constant and general Use, and little Influenced by 
Taxes; and I find it is confirmed by the Price of Barley, || 43 
which has decreased for a hundred Years last past, and nearly 
in the same Proportion as that of Wheat has done; and this 



42 



Joseph Massie 



with what Mr. Locke has said, appear to me sufficient Seasons 
for thinking this fall in the Price of Wheat is at least princi- 
pally, if not intirely owing to a decrease in the Quantity of 
Current Money in proportion to Trade; which however un- 
willing any one may be to believe, I cannot see Reasons to 
doubt; for if it was owing to there being but little Money in 
the Nation, that Wheat sold for several Hundred Years at 
three, six, nine, and twelve Shillings a Quarter, (which I 
never yet heard any one dispute) it must be owing to there 
being more Money a hundred years ago in proportion to Trade, 
that Wheat sold dearer at that time, than it has since done; 
or the Value of Money as an exchangeable Commodity cannot 
be governed by its Quantity ; which I believe no one will assert, 
or say it is so in respect of Wheat and Barley, when past 
experience has shewn, these Comodities as well as others, sold 
dearer for several Hundred Years as as the Quantity of Money 
increased; and it should be remember'd that so far as the 
Value of Wheat depends upon Labour, and the Expence of 
living, it ought to be dearer now than it was a Hundred Years 
ago, by as much as Taxes and Fashion have raised the Price 
of living to Labourers and Farmers since that Time, above 
44 what the Quantity of Money would make it. || 

A TABLE OF RATES OF INTEREST, AND PRICES OF WHEAT. 



The Value of MoDey as an 
exchangeable Commod- 
ity, or its Proportion to 
Trade, determined by 
the Price of Wheat. 


Legal Rate of 
Interest at 
the different 
Intervals. 


Natural Rate 
of Interest 
at the differ- 
ent Inter- 
vals. 


If the Proportion 
which Money has 
borne to Trade for 
20 Years last past 
was the Reason why 
natural Interest has 
been 4 per Ct. it 
should, according 
to Mr. Locke's Rule, 
have altered as fol- 
lows. 


Year from and 
to which the 
Price is tak- 
en at a Me- 
dium. 


Price in 
present 
Money. 


1444 to 1460 

1646 to 1665 
1666 to 1685 
1686 to 1705 
1729 to 1748 


1. s. d. 

12 1 

2 17 5 A 
2 6 3% 
2 5 9% 

1 8 6 


Not fixed by 
Law. 

8 
6 
6 
5 


Supposed to 

be about 
10 per Cent. 

7 
5 
5 
4 


9M 
2 

*y* 

4 



The Natural Eate of Interest 43 

From this Table it appears, that if the Proportion which 
Money here has borne to Trade for twenty Years last past was 
the Reason why natural Interest has been four per Cent, the 
natural Eate of it for forty Years from 1666 to 1705 ought to 
have been only two and a half per Cent, according to the 
Proportion which Money bore to Trade for that time, whereas 
it was double the Sum; by the same Eule, natural Interest 
from 1646 to 1665 should have been only two per Cent, and it 
was in Fact about seven per Cent. From 1444 to 1460 it 
ought to have been nine and a half per Cent, which comes 
within half per Oent. of the supposed Eate of that Time, for 
it was never regulated by Law till the thirty seventh of Henry 
VIII. but this will not prove the Eule to be true, even though 
we admit ten or nine and a half per Cent, was the actual Eate 
of Interest during that Interval, for if the || then Agreement 45 
of the Eate of Interest with the Eule, was the necessary Con- 
sequence of the Proportion which Money then bore to Trade, 
it could never have varied from it, in the Manner it has done, 
during the other Intervals, in which it neither agreed nor kept 
any Sort of Correspondence with the Eule; but on the con- 
trary fell gradually for a Hundred Years, whilst the Propor- 
tion of Money to Trade was Decreasing ; and instead of being 
double the Eate now, that it was a Hundred Years ago, it is only 
about half as much as it was then, and this I think undeniably 
proves Mr. Locke's Eule is wrong; and had he been as par- 
ticular in his arguments to prove or support it, as he has been 
in proving, that the Value of Money as an exchangable Com- 
modity depends upon the Proportion its Quantity bears to 
Trade, he would have found his Eule contradicted by the 
Alterations in Money and Interest that came within the Time 
which he himself speaks of : And this is the Eeign of Queen 
Elizabeth, and the Time he wrote ; for Extract sixteen he says, 
there never was brought into England, so great an Increase of 
Wealth since, as in Queen Elizabeth's, King James I. and King 
Charles lst's. Time; and this is confirmed by the Price of 
Wheat in the last of those three Eeigns, for it has never sold 



44 JosErH Massie 

for so much Money since ; he also speaks of Money being scarce 
when he wrote, and the Price of Wheat at that Time shews, 
there was then less Money in the Nation in Proportion to 
Trade, than there was fifty Years before. 

And during this Interval the natural Rate of Interest fell 
about two per Cent, so that if Mr. Locke had considered these 
Facts, and compared his Rule with them, he would have found 
it was not true. And there is another method by which the 
46 Rule might have been tried, which would || have given great 
Room to doubt the Truth of it, and this is, by inquiring what 
the Rate of Interest must have been for some Hundred Years 
backwards, if it depended upon the Proportion of Money to 
Trade : for if the Quantity of Money which made Wheat 2 /. 
17s. hd. per Quarter upon an Average of twenty Years, made 
natural Interest seven per Cent, it must have been fourteen 
per Cent, when Wheat Sold for 1 I. 8s. 8d.% per Quarter. At 
twenty-eight per Cent, when Wheat sold for I. 14s. 4:d\ and 
fifty six per Cent, when Wheat was 7s. 2d. and a Hundred and 
twelve per Cent, when Wheat was 3s. Id, per Quarter; and it 
has sold for less Money since the Conquest; and yet no one 
can imagine any Man ever paid 112 I, for the Use of 100 I. for 
a Year ; or that Interest was ever so high as fifty six or twenty 
n'gl it per Cent. 

Whether Mr. Locke would have applied this Rule in the 
manner I have here done, or not, I will not venture to say, but 
I cannot think of any other way to apply it, for he says, the 
Rate of Interest depends on the whole Quantity of current 
Money in Proportion to Trade ; and if so, Interest must alter 
as this Proportion changes; and if it alters, it must either 
alter equally with Money as above ; or else unequally, and then 
I would be glad to know, what the degree of Inequality is, and 
how it is found, as I cannot at present see any Reason for its 
being one more than another. But this is of no Consequence 
here; as Experience has shewn, the natural Rate of Interest 
neither alters equally nor unequally with the Quantity of 
Money in respect of Trade, nor has any Dependence on the 



The Natural Rate of Interest 45 

Proportion which the Money of a Country bears to the Debts 
of its Inhabitants one amongst another, it will therefore be 
necessary to || find other Eules than these to Account for the 47 
Eate of Interest, as it is plain they don't govern it ; and this is 
what I shall now endeavour to do. 

ON THE GOVERNING CAUSES OF THE NATURAL 
RATE OF INTEREST. 

In order to find out the Causes on which the natural Eate of 
Interest depend, I think it will be necessary to consider what 
the Eeasons for paying Interest are, as this seems to me to be 
the most natural and certain method of Inquiry in the present 
Case, for when we know the Foundation upon which Interest 
is built, we shall be the better able to determine what gov- 
erns it. 

And first, of the Eeasons for paying Interest. As the Pro- 
prietor of any Commodity has undoubtly the same Eight to all 
the Advantages it is capable of affording, as lie has to the thing 
itself, it is certain, that whoever he transfers any of these 
Advantages to, is as much under an Obligation to him, as if 
the Proprietor had given him the Commodity from whence 
they arise; because things are no otherwise Valuable, than as 
they are Useful, and he who has Benefited by the Use or Pos- 
session of any thing, may be justly said to have received Part 
of the Value of it, and Consequently to be in Debt on this 
Account to the Person to whom of Eight the thing belongs. 

Thus, he who borrows 100 I. in Money of his Neighbour for 
a Year, by the Use of which in Trade or otherwise for that 
Time, his Neighbour could, aud he may, make a Profit of 5 /. 
over and above paying for all the Trouble and Eisque produced 
thereby; is as much 105 /. in his || Neighbour's Debt, as he 48 
would have been if he had actually borrow'd so much Money of 
him, and paid it again immediately after it was Borrow'd; 
for though in one Case he receives 105 /. and in the other only 
100 1. yet hy having the Use of the latter Sum for a Year, he 
gains 5 /. more than he has a Right to, which is in Effect the 



16 Joseph Massie 

same thing, as though he had receiv'd so much more from his 
Neighbour ; because this 5 I. really belongs to him, as much as 
the 100 I. does, by the Use of which it was gained; and Con- 
sequently he ought to be paid the one as well as the other. 

By the same Eule, if Peter borrows one hundred Quarters 
of Wheat from James for a Year, and employs it in Trade or 
otherwise, with as much Advantage as before-mentioned, he 
is as really one hundred and five Quarters of Wheat in Jame's 
Debt at the Year's End, as the other Man was 105 I. in his 
Neighbour's Debt, tho' he borrow'd only 100 I. from him ; nor 
would it make the Claims of the Lenders for 105 I. in Money, 
or one hundred five Quarters of Wheat, at all less just, if the 
Borrowers should not be able to make the supposed Profit, nor 
even any Profit at all by the Money or the Wheat; for the 
Lenders having it actually, or at least apparently, in their 
Power, to make a clear Profit of 5 per Cent, by those Com- 
modities, had a Eight to demand such a Prsemium for them 
from the Borrowers, who, if they had got above 5 per Cent. 
neither would, nor ought to have paid more than they agreed 
for, and therefore, though they should not get so much, they 
ought nevertheless to abide by their Agreement, 

What has been said of Money and Wheat, is equally applic- 
49 able to all other Commodities, || which are capable of pro- 
ducing Profit to a Borrower, by the consumption, Use, or Pos- 
session of them ; and it is equally applicable to those who bor- 
row through Necessity, and without any View or Intention of 
Gain ; for a Man's wanting Money or Wheat to feed his Extrav- 
agance, or supply his present Necessity, is not a Eeason why 
they who can provide him with either, are not to take Interest 
for tbem, any more than it is for their not having their Princi- 
pal returned, as Lenders have the same Eight to the one as 
the other; for the Equitableness of taking Interest, depends 
not upon a Man's making or not making Profit by what he 
borrows, but upon its being capable of producing Profit if 
rightly employed. It cannot therefore be difficult to deter- 
mine what the natural Eate of Interest immediately depends 



The Natural Eate of Interest 47 

on ; for, if that which Men pay as Interest for the Use of what 
they borrow, be a Part of the Profits it is capable of producing, 
this Interest must always be govern'd by those Profits. 

And daily Experience shews is it so, for the Question which 
naturally arises in every Man's Breast, when he either lends 
or borrows, is, what can be got by the Thing lent or borrow'd ? 
If it be a great deal, Reason tells him he ought to receive or 
pay a high Rate of Interest for the Use of it; if only a little, 
that he ought to receive or pay only a low Rate of Interest for 
it : and the only Thing which any Man can be in doubt about on 
this Occasion, is, what Proportion of these Profits do of Right 
belong to the Borrower, and what to the Lender; and this 
there is no other Method of determining, then by the Opinions 
of Borrowers and Lenders in general ; for Right and Wrong in 
this Respect, are only what common Consent makes so. Mr. 
Locke || says, (Extract 4th) They divide the Profits equally 50 
between them, which, I believe, is generally the Case; and if 
so, the equitable Division of Profits made by the Use of Things 
borrowed, is, that Lenders should have one half, and Borrowers 
the other. 

This Rule of dividing Profits is not however to be apply' d 
particularly to every Lender and Borrower, but to Lenders and 
Borrowers in general; for one Man's having such remarkable 
Skill in his Profession, as to be able to get double the Profit 
by 100 I. which others in the same Way make, is not a Reason 
why he should pay twice as much Interest for it, any more 
than another Man's being so ignorant of his Business, as not to 
be able to get above half the common Profits, is a Reason why 
he should pay only half the common Rate of Interest ; remark- 
ably great and small Gains are the Rewards of Skill, and the 
Want of Understanding, which Lenders have nothing at all 
to do with; for as they will not suffer by the one, they ought 
not to benefit by the other. 

What has been said of particular Men in the same Business 
is applicable to particular Sorts of Business ; if the Merchants 
or Tradesmen employed in any one Branch of Trade, get more 



48 Joseph Massie 

by what they borrow than the comon Profits made by other 
Merchants and Tradesmen of the same Country, the extra- 
ordinary Gain is theirs; though it required only common Skill 
and Understanding to get it, and not the Lenders who sup- 
plyed them with Money : I say it is equitably as well as legally 
the Propetty of the Borrowers; for the Lenders would not 
have lent their Money, to carry on any Branch of Trade upon 
lower Terms, than would admit of paying so much as the 
51 common Bate of Interest; and therefore they || ought not to 
receive more than that, whatever Advantages may be made by 
their Money. 

As it appears from the foregoing Considerations, that In- 
terest is founded upon Profit, which common Consent seems 
to have fixed the Division of, equally between Lenders and 
Borrowers; I think it may safely be laid down for a Bule, 
that, 

The natural Bate of Interest is governed by the Profits of 
Trade to Particulars. 

And this I believe, will be found true in all civilised Ages 
and Countries; I make the Distinction of civilised, because 
lending cannot subsist unless Men have a Confidence in each 
other, and this it is to be feared, would in general be very 
slender, without the Help of Beligion and Laws, the latter of 
which at least, must be supposed to have their proper Force, 
or there can be little lending. If then it be asked, why In- 
terest was 8 per cent, in England a hundred Years ago, and is 
now only 4 per cent, or why it has fallen nearly in the same 
Proportion in Holland, during that Interval, as it has done in 
England; the Answer to both is, that Merchants and Trades- 
men in general, as well there as here, did then get double the 
Profits they now make. 

Or, if it be asked, why Interest which is now about 4 per 
cent, in this Country, should not be the same throughout all 
trading Countries, instead of being three per cent, in Holland; 
five and six per cent, in France, Germany and Portugal; seven, 
eight, and nine per cent, in the West and East-Indies, and 



The Natural Eate of Interest 49 

from ten to twelve per cent, in Turkey; one general Answer 
will do for the whole, which is, that the Profits of Trade in 
these several Countries differ from the Profits of Trade here, 
and so much as to produce all those different Eates of In- 
terest. || 52 

But we must not stop here, for though these are the Causes 
which immediately govern the Eate of Interest, there are 
superior ones which govern them, and what they are is next to 
be inquired. 

Mr. Locke says, (Extract 12) "That which causes Increase 
" of Profit to the Borrower of Money, is the less Quantity of 
" Money in Proportion to Trade, or to the Vent of all Com- 
" modifies taken together, and vice versa." But this I have 
shewn by Experience is not true; for the Profits of Trade in 
England have been decreasing for one hundred Years last 
past; tho' the Proportion of Money to Trade, has during that 
Time been diminishing, and consequently they cannot be 
governed by it. 

It must be owing to some other Eeason than this, that 
Merchants and Tradesmen in general got 16 per cent. Profit 
by Trade one hundred Years ago, and can now get only 8 per 
cent, and what this Eeason is, they are likeliest to know, who 
have been long in Trade, and have suffered most by the 
Change; for when Men find an Alteration to their Disad- 
vantage, they will leave no Method untried to come at the 
Cause which produced it. 

Let us inquire then of Merchants and Tradesmen, who have 
been many Years in Business, how it happens that their Profits 
are less now than they were when they first set out in the World, 
and I believe all or most of them will say it is owing either to 
an Increase of Traders or a Decrease of Trade, or to People 
in Trade lowering the Prices of their Commodities upon each 
other; which is the certain Consequence of such Alterations. 
And when once a Commodity is sold for less than the cus- 
tomary Profit by a few, || whether it be through Necessity to 53 
get some Trade, or through Avarice to get most, others who 



50 Joseph Massie 

deal in it must either sell for the same Profit, or lose their 
Customers, and this by Degrees will make great Alterations 
in the Profits of Trade; for every Merchant or Tradesman, 
who begins Trade and does not succeed to the Business left by 
a Father, a Master, or some other Person, must find out some- 
thing to induce People to give him a Preference, and so must 
he also who grasps at more than his Share of Trade ; and this 
is generally, selling some of the Goods they deal in, cheaper 
than they are Sold by others. And as some such Avaritious 
Men must always be expected, and all Branches of Trade must 
have a constant Succession of young Beginners, and many of 
them have no Business but what they Gain from others by 
Underselling them ; it is Plain, that this must have contributed 
much, towards Eeducing the Profits of Trade in General to 
half what they were a Hundred Years ago ; nor will it cease to 
Influence them till they are Reduced to their lowest Ebb. 

The general Profits of Trade are likewise liable to be altered 
by a Decrease of Trade, as well as by an Increase, or Change 
of Traders ; for it is much the same which alters, if a different 
Proportion between the one and the other be produced by the 
Alteration, for it is this, and not a Proportional Increase or 
Decrease of both, which Eaises or Lowers the Profits of Trade. 
How far a Decrease of Trade has contributed to reduce the 
Profits of English Merchants and Tradesmen within the Time 
before-mentioned cannot exactly be determined ; but if we con- 
54sider, that most of the foreign Trade in Europe a Hundred || 
Years ago, was carried on by the English, and Dutch, and that 
they are now Rivalled in some respect or other by the French, 
Swedes, Danes, &c. we cannot conclude otherwise of the Mat- 
ter, than that this fall of Profits has been principally owing to 
those Nations interfering with this, in Foreign Trade; espe- 
cially if we consider further, how most of the Princes and 
States in Europe, seeing the Importance of Commerce by the 
Increase of Power and Wealth of England and Holland, have 
Endeavoured to improve every natural means of Trade, that 
they may have the less Occasion for the Commodities of other 



The Natural Kate of Interest 51 

Countries, or be able to purchase them upon Terms less Dis- 
advantageous to themselves. 

These I take to be the chief Causes which have reduced the 
Profits of Trade in general within a Hundred Years last past; 
and to these may be added a third, which though far less con- 
siderable yet I think it has contributed something to the 
change ; and this is the East-India Trade, which, as it is now 
carried on, is advantageous to this and other Nations, but I 
very much doubt its being so to Europe in general. For if the 
Value (i. e. Cost and Freight) of all the un wrought and full 
Manufactured Commodities sent to East-India by the English, 
Dutch, French, &c. falls short of Purchasing all the Com- 
modities brought from thence; which, from the vast Quanti- 
ties of Silver yearly exported by all the European Nations who 
Trade there, over and above what the Gold returned is Worth, 
seems to be the Case; it is certain, that though these particu- 
lar Nations may regain the Money they parted with, yet the 
Europeans upon a general Ballance with the East-Indians are 
losers; || because Europe contributes more to the Trade of 55 
Asia, than Asia does to that of Europe; and the Difference is 
so much lost in the Quantity of Labour to the trading People 
of Europe, many of whom must by this means remain a 
burthen on their respective Countries; and the Labour so 
lost be paid for in Specie to the East-Indians likewise, which 
makes the Loss double; and thus it is that the Eiches of the 
West-Indies, are by the trading Nations of Europe carried to 
the East-Indies, without Producing any Advantages to the 
Trade of Europe in general, but on the contrary Disadvan- 
tages : for every piece of Silk, or Stuff brought from East- 
India, more than what the Commodities sent from Europe 
will purchase, is so much lost to the Manufacturers of some 
trading Country; for shift it how you will, it will certainly 
fix on some of them, and by Decreasing the Proportion of 
Trade must contribute to reduce the Profits of it as before- 
mentioned. 

From what has been said on this Head, I deduce the follow- 
ing Paile: 



52 Joseph Massie. 

That the Profits of Trade in general, are governed by the 
Proportion which the Number of Traders bears to the Quan- 
tity of Trade. 

And this is in general confirmed by the fall of Interest in 
the several trading Countries of Europe within the last Hun- 
dred Years, in which the Number of Competitors for Foreign 
as well as Domestic Trade, has greatly increased, and by lower- 
ing the Profits of it, has lowered the Eate of Interest; and if 
we look into the different Countries of Europe, it will be found 
that the present Eates of Interest in them, and consequently 
the Profits of Trade, correspond with the Eule, for in Holland 
56 where the Number of People employ'd in || Trade, bears the 
greatest Proportion to the whole Number of Inhabitants, of any 
Country properly situated for Commerce, Interest is the low- 
est; and in Great-Britain which comes nearest to Holland in 
this respect, the Eate of Interest comes nearest to that of 
Holland; in France, Portugal, Germany, and Spain, where 
there is less Trade in proportion to the Numbers of People, 
Interest is higher than it is here; and in Turkey, where the 
Disproportion is still greater, Interest is higher than in any 
of the before-mentioned Countries. 

As to the Eates of Interest received and paid in the different 
Colonies and Settlements in America, and in the East and 
West-Indies, I did not think it proper to mention them with 
those already spoke of ; not that they contradict the Eule laid 
down, but because they are in general higher than the Eates 
of Interest in the different trading Countries of Europe; and 
the Eeason why they are, and probably always will be so, I take 
to be this ; their Trade depends very much upon Europe, and 
consequently is attended with greater Eisks from the Sea, or 
Change of Climate, or both, than the Trade between Countries 
which are not so far distant from each other, and therefore it 
must either produce greater Profit, or Merchants would not 
engage in it ; but Interest has nevertheless fallen in those Parts 
of the World, and will continue to do so, as the general Trade 
of Europe is closer driven, though, for the Eeason before- 



The Natural Eate of Interest 53 

mentioned, I think Interest must always be higher in those 
Colonies and Settlements than it is at the same time in the 
Countries of Europe to which they respectively belong. 

Having now shewn that the Profits of Trade are governed 
by the proportion which the Number of Traders bears to the 
Quantity of Trade; it will || next be necessary to find out what 57 
governs the Proportion between Trade and Traders, and this I 
apprehend is to be done by considering what the Motives to 
Trading are. 

The first and greatest Motive to trade is Necessity; for 
Nature has distributed the Necessaries and Conveniences of 
Life in such a manner, as makes it impossible for any Man to 
procure by his own Labour so many of them as are requisite 
for his living conveniently and agreeably; and there is no 
Method of remedying this Inconvenience without the Assist- 
ance of other People, but with that it may be done ; for Peter 
being able to procure by his own Industry, more of some useful 
Things, and James more of others, than are required to satisfy 
their respective Wants : They have it equally in their Power 
to furnish each other with what their Labour falls short of 
procuring, by exchanging the Excess of such Things as they 
have, for a Sufficiency of those they want; and this Inability 
to subsist conveniently by our own Labour, is the first and 
chief Motive to Trade. 

But this is not the only Inducement which Men have to 
traffick; for if it was, the Quantity of Trade in every Nation 
in proportion to the Numbers of its Inhabitants, or to its 
natural Fertility or Sterility, would be alike, which is far 
from being the Case; for in some Countries human Life is 
one constant Scene of Labour, and in others, it is scarcely any 
thing but Inactivity and Indolence, so that one would be apt 
to think Nature had inspired one Part of human Pace with 
Industry and the other with Idleness ; but the Difference arises 
from a lower Principle, it is Government, and not Nature, 
which makes Men thus to differ from each other : they labour 
for the present Day through Necessity, but where they extend 



54 Joseph Massie 

58 their Cares to || Futurity, it is from a Prospect of enjoying 
hereafter the Fruits of their present Industry, which they have 
not in all Places; and this is the Eeason, why Men in one 
Country are very industrious, in another very lazy, and in a 
third, neither remarkable for the one nor the other. 

And agreeable to this, we find by the low Eate of Interest 
in Great-Britain and Holland, where Government is free, and 
Mens private Eights are best preserved, that there are more 
Traders in Proportion to the Numbers of People those Coun- 
tries contain, than there are either in France, Portugal, Ger- 
many, Spain, or any other Countries in Europe, where Govern- 
ment is arbitrary, and private Property is less secure. So true 
is that excellent Eemark of Sir William Temple's, That " Trade 
" cannot grow or thrive to any great Degree, without a Con- 
" fidence both of publick and private Safety, and consequently 
" a Trust in the Government, from an Opinion of its Strength, 
" Wisdom, and Justice ; which must be grounded either upon 
" the personal Virtues and Qualities of a Prince, or else upon 
"the Constitutions and Orders of a State." Observations on 
the Netherlands, p. 190. 9 

These then are the Causes which govern the Protion be- 
tween Trade and Traders. 

I. Natural Necessity. 

II. Liberty. 

III. The Preservation of Men's private Eights. 

IV. Publick Safety. 

I. Of Natural Necessity. The necessary and useful Pro- 
ductions of Nature are so partially and unequally distributed 

59 in different Countries, that it || is much to be doubted, 
whether there are any two Nations in Europe in which an 
equal Quantity of Labour would be required to enable a certain 
Number of People to live with the same Degree of Con- 
venience, if they were to be confined to the Productions of that 
Country alone, and not receive any Helps from others, which 
I believe every one will agree in, who considers, there are no 
two Countries which furnish an equal Number of the Neces- 



The Natural Rate of Interest 55 

saries of Life in equal Plenty, and with the same Quantity of 
Labour; and that Mens Wants increase or diminish with the 
Severity or Temperateness of the Climate they live in: And 
consequently, the Proportion of Trade which the Inhabitants 
of different Countries are obliged to carry on through Neces- 
sity, cannot be the same, nor is it practicable to ascertain the 
Degree of Variation further than by the Degrees of Heat and 
Cold; from whence one may make this general Conclusion, 
that the Quantity of Labour required for the Maintenance of 
a certain number of People is greatest in cold Climates, and 
least in hot ones ; for in the former, Men not only want more 
Cloaths, but the Earth more cultivating, than in the latter, 
where they have little Occasion for Cloaths, and may often be 
said to wear them more for Decency and Fashion, than 
through Necessity : And where the voluntary Productions of 
Nature are so great, that the Cultivation of Land is much less 
necessary. Thus for Example, those who live in the South 
Part of Europe can support themselves with less Labour, than 
those who inhabit the middle Part of it, and these can subsist 
with less Labour than the Inhabitants of the North Part of it. 
And now I am speaking of Necessity obliging some People to 
trade more, and others less, I cannot omit mentioning || one 60 
kind of Necessity which is peculiar to Holland, and this arises 
from the Country being over-peopled; which, with the great 
Labour required to fence and drain their Land, makes their 
Necessity to trade greater than it is in any other Part of the 
habitable World. 

II. Of Liberty. The Influence which the Enjoyment of 
Liberty has over Commerce, may in general be seen by such 
free Countries as are well situated for Commerce, having the 
most Trade in proportion to their Numbers of Inhabitants; 
but if we would see its greatest Effects, we must look into 
Holland, which, from the natural Quality of its Soil, and the 
Lowness, and consequently Unhealthiness of its Situation, 
is not a desirable Country; and yet so sweet is Liberty, that 
Men chuse rather to live on this free Spot, and submit to all 



56 Joseph Massie 

the natural Inconveniences and Disadvantages it lies under, 
than go where Nature, but not Liberty smiles. 

III. Of the Preservation of Men's private Eights. As this 
is the natural Consequence of Liberty, dividing of them seems 
an unnecessary Distinction, but it is not so in this Case; for 
there are are Countries where Government is arbitrary, which 
sometimes carry on a much greater Proportion of Trade than 
Necessity requires; and this is owing to the personal Virtues 
or Policy of their Princes; who either from Principles of 
Justice and Humanity, or of Self-interest, give that Protec- 
tion to Subjects by their own Power, which in free Countries, 
is derived from Law, and this whilst it continues is an En- 
couragement for Men to be industrious, and engage in Trade ; 

61 but as their Security is only per || sonal, and liable to and 
with a Prince's Life, and Trade cannot soon be made to alter 
its Course; their Views and Undertakings will be less exten- 
sive than in free Countries, where Men have better Security 
for their private Eights, and the Enjoyment of the Fruits of 
their Labour, than the mutable Will of an arbitrary Prince; 
and consequently Trade cannot thrive for any long Tract of 
Time, so well under the one as the other. 

IV. Of publick Safety. What has been said of Liberty, and 
the Preservation of Mens private Eights is in some Measure 
applicable to publick Safety : For they are all Branches of one 
Tree, and contribute to produce the same Fruit, which is 
private Safety : And this is what all Men have some Degree 
of Confidence in, who trade further than Necessity obliges 
them ; which they cannot have, when superior Force from with- 
out, threatens a general Eavage and Devastation; any more 
than they can when Tyranny or Anarchy prevail at home. 

From what has been said concerning the Motives which 
induce Men to trade, I think this Conclusion may be made; 
that, 

The Number of Traders in a Country is governed by the 
Necessity and Encouragement which there is to trade. 

As I have now mentioned every thing concerning the Gov- 
ernment of the Eate of Interest, which at present seems to me 



The Natural Kate of Interest 57 

material, I shall conclude with a brief Kepetition of my own 
Sentiments on the Matter, which are as follow : 

That the natural Eate of Interest is governed by the Profits 
of Trade to Particulars. 

That the Profits of Trade are governed by the Proportion 
which the Number of Traders bears to the Quantity of 
Trade. || ™ 

That the Number of Traders is governed by the Necessity 
and Encouragement which there is to trade. 

This is the Light in which natural Interest appears to me ; 
but if any thing can be offered which is better supported by 
Facts, I shall be ready to alter my Opinion whenever it 
appears. 

FINIS. 




NOTES 

1 (page 11) The extracts cited contain a number of minor verbal 
errors as well as numerous inaccuracies in the matter of punctu- 
ation, capitalization and paragraphing. 

2 (page 11) " Several essays in Political Arithmetick: The 
Titles of which follow in the Ensuing Pages" (London, 1699). 

8 (page 12) " Some considerations of the Consequences of the 
Lowering of Interest, and Raising the Value of Money. In a 
Letter to a Member of Parliament" (London, 1692). 

The citations in Massie's text are to be found in the above 
edition of Locke's essay as follows: 2, p. 8; 3, pp. 10-11; 4, p. 13; 
5, pp. 17-18; 6, p. 19; 7, pp. 40-41; 8, pp. 47-48; 9, p. 48; 10, pp. 
53-54; 11, p. 61^12, pp. 70-71; 13, pp. 71-73; 14, p. 80: 15, pp. 84-85; 
16, pp. 105-106 ;*17, p. 124. 

4 (page 20) "Considerations upon a Reduction of the Land- 
Tax" (London, 1749), pp. 31, 51. 

5 (page 27) The Young Pretender was defeated at Culloden on 
April 16, 1746. 

a (page 37) " Chronicon Preciosum: or, an Account of English 
Money, the Price of Corn, and Other Commodities, for the last 
600 years. In a Letter to a Student in the University of Oxford " 
(London, 1707). A second edition was published in 1745. 

7 (page 38) "Political Arithmetick" (London, 1690), pp. 85, 
112-113; in "Economic Writings" (ed. Hull; Cambridge, 1899), 
vol. i, pp. 297, 311. 

8 (page 40) " An Historical Account of English Money, from the 
Conquest, to the Present Time; including those of Scotland, from 
the Union of the two Kingdoms in King James I. The second 
edition, with great Additions and Improvements, Tables of Gold 
and Silver Money, and Six New Cuts" (London, 1745). 

(page 54) "Observations upon the United Provinces of the 
Netherlands"; in "The Works of Sir William Temple, Bar 4 ." 
(Edinburgh, 1754), vol. i, pp. 1-157. 



LBAg'!2 






